According to Clyde Prestowitz, president of the Economic Strategy Institute, and author of "Three Billion New Capitalists: the Great Shift of Wealth and Power to the East," writing in the FT about Katrina:
Rebuilding the coastal zone will cost about 200 billion dollars, and GWB has decreed no tax increases, so this takes the federal deficit from about 350 billion dollars to 600 billion. This is funded by selling US treasuries (treasury bonds), largely to Asian central banks, especially the PCOB (People's Bank of China) and the Bank of Japan. In fact about 75% (that's right 75%) of the debt coverage comes from central banks in the rest of the world with their dollar holdings.
In other words, the defiicit growth in the US is absorbing about 80% of the world's savings available for international investment. Maybe the USA needs to worry about how its perceived in the global market more than ever, not be off on glorious adventures in borrowing.
Still, cheery old Paul Volcker has read these facts and decided that there is a 75% chance of a global financial crisis as a result within five years. Apparently.
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